Last updated: August 2025
For many Texas homebuyers with strong credit, stable income, or equity from a previous home, a conventional loan can be the fastest, most flexible route to financing. These loans make up more than 60% of purchases statewide—and for good reason.
Unlike FHA or VA loans, conventional mortgages aren’t backed by the federal government, giving lenders more freedom to approve unique properties and tailor terms for well-qualified borrowers. At Salute Mortgage, we help move-up buyers, growing families, and refinancing homeowners use conventional financing to avoid PMI, close faster, and stay in control of their loan terms.
What Are Conventional Loans and How Do They Work in Texas?
A conventional loan is simply a mortgage that’s funded by a private lender and not insured by federal programs like FHA, VA, or USDA.
That means qualification is based on your credit profile, income, and the property you’re buying—not a set of government rules.
Key features of conventional loans:
- Funded by private lenders (no government backing)
- Conforming loans follow Fannie Mae & Freddie Mac guidelines
- Jumbo loans available for higher-priced homes
- PMI (private mortgage insurance) is required with less than 20% down
- Flexible property eligibility, including condos, vacation homes, and investment properties
- Generally, higher credit and income standards than FHA or VA
Plain talk: If you have good credit, a steady job, and some money saved, a conventional loan may give you more home choices and lower long-term costs than an FHA loan.
Conventional Loan Requirements in Texas
Conventional loans typically require a stronger financial profile than FHA, but they reward that with more flexibility and lower long-term mortgage insurance costs.
Typical requirements:
- Credit score: Minimum 620; 740+ gets the best rates
- Down payment: 3–5% minimum; 20% to avoid PMI
- Debt-to-income ratio: Usually capped at 43–50%
- Employment history: Stable 2-year work record preferred
- Income documentation: Tax returns, pay stubs, and verification from employer
- Asset verification: Proof of down payment funds and reserves
Borrower example: If you sell your current home and use the equity for a 20% down payment on your next one, you can skip PMI, enjoy a lower monthly payment, and close faster.
How Much Down Payment Do You Need?
Your down payment directly affects both your monthly cost and whether you’ll pay PMI.
Typical down payment tiers:
- 3% down: For first-time buyers within income limits
- 5% down: Standard minimum for most borrowers
- 10% down: Lower PMI cost, better rates
- 20% down: No PMI, lowest interest rates available
- 25%+ down: Often required for investment or jumbo properties
Example: On a $400,000 Texas home:
- 3% down = $12,000 + PMI
- 20% down = $80,000, no PMI, savings of $200–$400/month
Understanding Private Mortgage Insurance (PMI)
PMI is an extra cost for borrowers who put less than 20% down. It protects the lender if you default—not you.
PMI basics:
- Cost: Around 0.20%–2.25% of loan amount annually
- Lower credit scores = higher PMI rates
- Cancels automatically at 78% loan-to-value (LTV)
- You can request removal at 80% LTV with an appraisal
Plain talk: If your home appreciates quickly, you might get rid of PMI in just a few years—much sooner than with FHA’s mortgage insurance, which often lasts the life of the loan.
Conventional vs. FHA Loans in Texas
Conventional and FHA loans both help Texans buy homes, but they fit different borrower profiles.
| Feature | Conventional | FHA |
|---|---|---|
| Credit requirement | 620+ | 580+ |
| Down payment | 3–5% | 3.5% |
| Mortgage insurance | Removable | Lasts for life of loan |
| Property rules | More flexible | Stricter |
| Best for | Strong credit, larger down payment | Lower credit, smaller savings |
Borrower tip: If you have a 740 credit score and at least 10% down, conventional usually costs less over time. FHA may make more sense if you’re rebuilding credit or have limited savings.
Conventional Loan Programs in Texas
Salute Mortgage offers a range of conventional loan options to fit your buying or refinancing needs.
Popular choices:
- Fannie Mae & Freddie Mac conforming loans – up to $524,225 in most Texas counties, $786,650 in high-cost areas
- Jumbo loans – for higher-priced homes above conforming limits
- Investment property loans – 20–25% down required
- Second home loans – for vacation or seasonal properties
- Refinancing – rate-and-term or cash-out options
Before You Choose a Conventional Loan
Conventional loans offer:
- No upfront mortgage insurance premium
- PMI removal at 20% equity
- More property type flexibility
- Higher loan limits in some areas
- Faster closing times
Potential drawbacks:
- Higher credit score requirement
- Stricter debt-to-income limits
- Larger down payment preference for the best terms
Plain talk: If you’re financially ready, a conventional loan can save you thousands over the life of your mortgage.
Ready to See if a Conventional Loan Fits Your Texas Home Plans?
At Salute Mortgage , we combine speed, clear numbers, and personal service so you can buy with confidence. We can run your numbers in minutes, explain every option, and get you pre-approved fast—often the same day.
Get your personalized quote today and see how competitive rates, flexible terms, and fast closings can help you land your Texas dream home.
